AYB221 Lecture Notes - Lecture 3: Digital Signature, Audit Trail, Transaction Processing

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4 Jun 2018
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Department
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Lecture 3 Controls and Fraud in AIS
Corporate governance, IT governance
- Corporate governance (enterprise risk management)
- IT governance (Australian IT governance)
Enterprise Risk Management
- A holistic (total) risk management approach
Corporate Governance
- The way by which companies are directed and managed
- It influences how the objectives of the company are set and achieved, how risk is monitored
and assessed and how performance is optimized
- It is the rules (structures and systems) by which organizations follow
Importance of Corporate governance to accounting
- Optimal performance in organisations is closely linked to the accounting function
IT Governance
- IT governance is concerned with whether IT is being used within the organisation in the
manner intended
- 4 main objectives
o Ensuring consistency with organisation goals
o Ensuring IT used to optimise business opportunities
o To ensure responsible usage
o Ensuring appropriate risk management strategies are in place
- 5 key areas that need to be considered by those with the responsibility of managing IT
o Adding value
o Managing risk
o Matching IT to strategy
o Measuring performance
o Managing resources
Internal Controls
- The measures an organisation employs to help attain the objectives of efficient operations,
reliable reporting and compliance with relevant laws
- Reasonable assurance: an organisation is meeting its objectives
- Management: Different people are involved in internal control, people affect how internal
controls operate
- Objectives of Internal Controls:
o Effectiveness and efficiency of operations
Profitable operations
Protecting resources
o Reliability of financial reporting
o Compliance with applicable laws and regulations
Legislative requirements
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Internal Control & Accounting
- One of the key activities of accounting is the creation of financial statements
- Financial statements make a series of assertions about the events that have taken place and
the balances that are presented: Enron
- Applying internal controls involves an evaluation of these assertions coupled with a risk
assessment
- Once risk has been identified it needs to be evaluated
- Risk assessment and management will be covered in more detail in future weeks
Control in AIS
- Control- actions to provide reasonable assurance that things are done in the desired manner
- One of the three functions of an AIS
o The other 2 are transaction processing and information for decision making
- Influences or restrains the activities of a system
- Design and implement control systems, and audit systems already in place
Threats/Exposure/Likelihood
- Threats potential adverse events that may affect the organisation
- Exposure/Impact - $ amount that could be lost if threat becomes a reality
- Likelihood probability that a threat will eventuate
- Expected Loss = Impact * Likelihood
- Cost of implementation of controls must be offset by reduction in above
The Role of Accountants
- Management expects accountants to be control consultants
o To be proactive in eliminating system threats
o Detect, correct and recover from threats when they occur (contingency plans)
Types of Threats Disasters
- Natural disasters
- Software bugs
- Unintentional acts
- Intentional acts
The Limitations of Controls
- CPA Australia identifies five reasons an internal control system does not provide 100%
assurae that a orgaisaio’s objectives will be achieved:
o 1. Management override
o 2. Weak internal controls
o 3. Judgement error
o 4. Unexpected transactions
o 5. Collusion (2 or more staff working together to commit fraud)
Control Objectives
1. Safeguarding assets
2. Maintaining adequate records
3. Providing accurate and reliable information
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Document Summary

Lecture 3 controls and fraud in ais. The way by which companies are directed and managed. It influences how the objectives of the company are set and achieved, how risk is monitored and assessed and how performance is optimized. It is the rules (structures and systems) by which organizations follow. Optimal performance in organisations is closely linked to the accounting function. It governance is concerned with whether it is being used within the organisation in the manner intended. 4 main objectives: ensuring consistency with organisation goals, ensuring it used to optimise business opportunities, to ensure responsible usage, ensuring appropriate risk management strategies are in place. 5 key areas that need to be considered by those with the responsibility of managing it: adding value, managing risk, matching it to strategy, measuring performance, managing resources. The measures an organisation employs to help attain the objectives of efficient operations, reliable reporting and compliance with relevant laws.

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